Our lender seems to really be pushing us to make a 20% downpayment on the house we're buying. Yes, we can afford it, but why would we want to tie up so much of our cash?
The biggest reason is that if you are getting a loan for more than 80% of the purchase price of the property, you will probably be required to purchase Private Mortgage Insurance (PMI). That is insurance that protects the lender in the event your loan goes into default in the first few years. If the lender has to sue you to collect on the note and foreclose on the mortgage, the lender will incur costs in doing so. Then, when the property is sold at auction, it isn't going to bring as much as it would in a non-forced sale. That means the lender could end up losing money and the insurance protects against that eventuality. Since the big danger zone for loss to the lender begins to disappear once you have at least 20% equity in the property, you won't need PMI if you put down 20%. By doing so, you're saving yourself the money you would otherwise be throwing away on required PMI premiums.
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The biggest reason is that if you are getting a 